Transportation Index Leads Equities Higher

Transportation Index Leads Equities Higher

The recent upside breakout seen in the US Transportation Index is a very important signal for traders. Our research team has been following these moves for many months and we believe the recent upside breakout in the $TRAN is a strong sign of future US Equities price moves and all traders should be paying very close attention.

The Transportation Index typically leads the US Equities markets by about 3 to 6 months. Transportation is one of the core elements of economic activity. Items entering the US or distributed throughout the US must rely on transportation to ship/deliver these goods to resellers, wholesalers, and ports. When the Transportation Index rises, one should expect the economic activity to continue to increase.

Given that we are only three months from the Christmas holiday season and understanding that retailers, wholesalers, and warehouses have likely already been stocking up on the holiday items, it makes sense that the Transportation Index would have been climbing over the past few months. Remember, the Transportation Index leads equities by about 3 to 6 months. So, we would have expected the Transportation Index to rally about 6 months before December if the economy was strengthening.

The breakout rally currently exhibited in the Transportation Index paints a picture that many may not be aware of for early 2019. Should the Transportation Index rally continue into October or November, or possibly longer, this would indicate that the US Equities market could continue to rally well into March or April of 2019 – possibly much longer. This means traders looking for a massive top any time soon or big short sellers could have some big selling positions as this rally continues for the next 6+ months. While many are bearish on stocks and short the market, we remain long IYT with our position with members.

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